The Environmental Impact of Biotech and Pharma Operations
A recently published report offers a realistic picture of the current state of healthcare sustainability.
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From the production of medicines to the development of new treatments, the healthcare industry has always been at the forefront of cutting-edge science. Diseases that were untreatable a century ago are not even considered an issue now due to this industry's intense research and development (R&D) efforts. However, even though the progress of the industry is nothing short of commendable, there's a high cost associated with it – its environmental impact.
A 2019 study by Health Care Without Harm found that the carbon footprint of the healthcare industry contributes to 4.4% of total global emissions. Another study found that the carbon footprint of public companies in this sector was at least 197 tonnes of carbon dioxide equivalent – or tCO2e – higher than the semiconductor, forestry and paper industry; for context, these three industries are considered some of the most carbon-intensive sectors. When you consider that the healthcare industry surpasses the rest, there's a clear need to address the elephant in the room.
My Green Lab, a non-profit sustainability organization, and Intercontinental Exchange Inc. (acquired by Urgentum), a provider of emissions data, recently collaborated to publish a report, The Carbon Impact of Biotech & Pharma: Progress to the UN Race to Zero. The report quantifies emissions from companies in the biotechnology and pharmaceutical industry and offers a realistic picture of the current state of healthcare sustainability.
Let's look at the report's core findings and what it means for the future of this industry.
91% of publicly traded companies do not have climate agreements
One of the most shocking findings of the study was that 91% of the publicly traded companies analyzed didn't have concrete climate commitments in place, meaning they do not have an internal framework to meet the goal of a 1.5 °C world envisioned by the Intergovernmental Panel on Climate Change, or IPCC, by 2030. The initial goal set by the IPCC to limit the effects of climate change was to ensure global temperature rise was limited to <2 °C above the average temperature levels we observed before the Industrial Revolution. Recently, IPCC's report reduced that number to 1.5 °C – as we need to remove some of the carbon already present in the atmosphere to truly control the impact of climate change.
However, with many carbon-intensive industries unable to control their emissions and governments not enforcing legally binding agreements, achieving a net zero carbon emission world by 2030 will be challenging. As per the Carbon Impact of Biotech & Pharma report, only 9% of the 75 analyzed companies have targets that align with the 1.5 °C target. The rest are either in the 2–3 °C or 3–5 °C warming range – far from the intended goal.
François Le Scornet, a climate tech consultant, says that there are several reasons companies fail to address this issue, which go beyond ignorance and could be due to the lack of resources or understanding required to meet these goals. "Today, most companies understand that climate action will define many new policies and markets, and most CEOs now seriously address this topic. However, despite this realization and in the absence of direct external constraint (public policies or immediate customer pressure), some players may, unfortunately, choose to delay action and transparency around this topic," he says.
Even if the industry does take the measures required, it needs to be backed up by tangible progress. This is because the longer we wait, the harder it becomes to achieve the goal. For instance, in 2023, the industry needs to reach an annual carbon reduction rate of 9.28% as opposed to 7.03% last year. So, greenhushing and lack of efforts in this regard could cost not just the companies but the entire planet their future.
The total carbon impact of public private companies rose to 260 million tCO2e from 2020 to 2021
As of 2021, the total carbon output of publicly listed companies in biopharma and biotech stands at 227 million tCO2e, and when we add in the total carbon output for private companies, it brings the total impact to 260 million tCO2e, according to The Carbon Impact of Biotech & Pharma: Progress to the UN Race to Zero report. These numbers have risen by 15% from 2020 – indicating a need to look closely at scope 1 and scope 2 emissions.
What are scope 1, 2 and 3 emissions?
Scope 1 emissions refer to emissions from a companies' own/controlled sources. Scope 2 emissions, on the other hand, refer to the carbon impact from purchased energy, while scope 3 emissions are indirect, created within the company's value chain (upstream or downstream).
Analysts recommend that companies address scope 1 and 2 as a priority, because they can have an immediate impact. However, ignoring scope 3 emissions could cause more harm than good in the long run, and the report's findings indicate less interest in this sector, a conclusion that is supported by Science Based Targets. The organization provides a public list of companies that have signed up to the Science Based Targets Initiative (SBTi) to reduce their greenhouse emissions. The data is updated every single day – providing an up-to-date list of companies who are actively contributing to these efforts. As per the data published on 28th February 2023, most companies want to achieve a 20%–100% reduction in scope 1 and 2 emissions between 2025 and 2035. Alternatively, they only want to achieve a 10%–40% reduction in scope 3 emissions between 2025 and 2035.
Scornet says, “Companies need to perform an in-depth assessment of their scope 3 footprint in order to decide how to prioritize areas to focus on for reduction. Companies can use the Greenhouse Gas Protocol Guide or other recognized methodologies in their respective countries (e.g., “Bilan Carbone” in France) to do so. The idea is to address the most emissive activities by buying goods and services with lower carbon footprint, by avoiding unnecessary travel (by plane especially), by promoting a switch to lower emission fuels for upstream/downstream transportation and by manufacturing more energy efficient and durable products among other measures.”
Scope 3 emissions were 4.3 times and 3.3 times higher for public and private companies, respectively when compared to scope 1 and 2 emissions
Another key finding from The Carbon Impact of Biotech & Pharma: Progress to the UN Race to Zero report was that scope 3 emissions were much higher than scope 1 and scope 2 emissions combined: approximately 4.3 times higher for publicly-listed companies, and 3.3 times higher for private companies. The report emphasizes that, while this ratio might seem alarmingly high, it is in fact lower than other industry sectors.
The data indicates a need for companies in the life sciences sector to evaluate their value chain, as most scope 3 emissions arise from purchased goods and services and sold goods.
The report also highlights a lack of standardized reporting for scope 3 emissions across the biotech and biopharma industries. While some companies have different methods of reporting their emissions data, others don't even record it. Some of these reporting discrepancies may be attributed to the difficulty of obtaining such data from suppliers. For instance, if a company has over 1000 suppliers and, in turn, tens of thousands of stock-keeping units (SKUs), monitoring the carbon impact through the lifecycle of each SKU is incredibly challenging. As these emissions typically account for 65 to 95% of most companies’ carbon impact (across various industries), it’s crucial that they follow standardized protocols like those provided by Carbon Trust (Greenhouse Gas Protocol).
Largest companies by revenue are making the most progress in UN Race to Zero
While the previous findings of the report are concerning, there is light at the end of the tunnel.
Companies that have made the most revenue were also the ones that showed significant progress towards the UN Race to Zero initiative. Forty six percent of the largest companies based on revenue committed to the UN Race to Zero initiative at the time of the report’s publishing, as opposed to 31% in the previous year. These companies aim to cut carbon emissions by 50% by 2030 and reach net zero by 2050, indicating a step forward for the industry as a whole.
Scornet emphasizes that this is an absolute must for this industry if it wants to survive the long-term challenges of being in business. “If pharmaceutical and biotech companies do not take the reduction of their carbon impact seriously, they shoot themselves in the foot in the long run. Delaying climate action probably appears as a short-term gain but it’s definitely a very significant strategic mistake in the long run,” he says.
Scornet proposes the following reasons why companies in this sector should consider investing in climate change initiatives:
- Indirect exposure to fluctuating oil and gas prices and exposure to more stringent regulation and taxation on carbon will remain an issue for the companies that don’t take action soon enough.
- The new generation of talent – which is particularly sensitive to climate change – may be less attracted by companies that aren’t taking action.
- It's the moral responsibility of the pharmaceutical and biotech companies – which are already targeting healthier world as part of their mission – to address climate action.
The pharmaceutical and biotech sector also crossed the Breakthrough Ambition threshold in 2021, defined as a timepoint where “sufficient momentum is generated among a critical mass of key actors, enabling them to break away from the business-as-usual path and together deliver breakthrough outcomes at pace”. This threshold was deemed as crossed when 20% of the major companies in the field joined the UN Race to Zero campaign.
Moreover, in 2021, the My Green Lab certification program was selected as a key indicator of progress for the UNFCCC High-level Climate Champions' 2030 Breakthroughs. It means that as long as 95% of laboratories in the MedTech and pharmaceutical sector receive this certification, it'll be official that the industry is working towards the Breakthrough Outcome, i.e., they have the leverage to make a true difference by 2030.
What does this report mean for the future of medical research?
While the biotechnology and pharmaceutical sector faces unique challenges in reducing emissions, it's crucial to remember their potential to lead the way. Companies setting ambitious goals to reduce carbon pollution and investing in green energy should be celebrated as a success story – and hopefully will serve as an example for other industries.
The prospects of net zero emissions by 2050 and abiding by the Paris Agreement certainly look achievable with cooperation from all sides – and every industry has a responsibility to help make this goal a reality.
